Upstart Swiss airlines face early roadblocks

Major structural changes announced by Swiss International Airlines in June include a considerable reduction of the company’s regional network with the start of its winter timetable, in late October. But while Swiss frantically clutches for a financial lifeline, there appears no shortage of newcomers willing to fill the airline’s shoes. Most of them want to open service between Lugano and Geneva–two cities reachable by air across the Alps in 45 minutes, versus more than five hours by road or rail. By late August, however, a new barrier raised by the Swiss government had dampened much of the enthusiasm.

Following a Swiss Ministry of Transport-directed audit of the national air safety system, the agency charged with implementing recommendations–the Swiss Federal Office of Civil Aviation (FOCA)–ordered the realignment of landing aids at Lugano to reduce the glideslope to six degrees at all stages of descent. FOCA also decided to extend the horizontal visibility limit from 4,900 feet to 10,150 feet. The deadline for comments was to close August 29, just a week after the publication of the new procedures.

Lugano’s single 4,430-foot runway, situated at 01/19, presents pilots with a difficult approach from both directions and requires special training. Descending aircraft must maneuver around mountains before establishing final approach. FOCA determined that approaching aircraft routinely reach descent angles of up to 11 degrees during the intermediate segment under current procedures.

Under the new regulations, the 50-seat Saab 2000, currently the most frequently used aircraft at Lugano, would no longer be allowed to land there. Among executive aircraft often seen at the airport, the Cessna Excel and the Challenger 604 would also face extinction, while the much larger Avro RJs, which Swiss plans to use for its Zurich feeder flights, would feel no effect.

Politicians and airline executives harshly criticized FOCA’s measures, charging that the agency relied on 10-year-old ICAO rulings to reach its conclusions and that Lugano has not experienced an above-average incident rate in recent years. While it seemed unclear whether political and economic pressure would delay or attenuate restrictions at Lugano, FOCA remained adamant and said it would implement the new measures “within weeks.”

In late August the provincial government of Ticino filed a protest with the Swiss federal government, demanding a longer comment period before the proposed changes take effect. Days later, on August 29, FOCA director André Ayer resigned amid criticism over his abrupt reversal in attitude regarding Lugano’s approach rules. Swiss transportation minister Moritz Leuenberger named Max Friedli, director of the federal office of terrestrial transport, as interim director of FOCA, which subsequently extended the deadline for comments until September 12. Lugano Airport has since commissioned an independent study into its approach procedures, the result of which would likely not be ready before the comment period expired.

Swiss Express GroundedMeanwhile, Swiss has dropped plans to establish an independent regional airline under the designation Swiss Express. The company will, however, restructure its regional operations with the start of the winter timetable, on October 26, and operate a regional fleet reduced from 59 to 39 aircraft, including six Saab 2000s, 14 Embraer ERJ-145s, four Avro RJ85s and 15 Avro RJ100s.

Entrepreneurs from all walks of life have announced their intention to set up new regional airlines aimed at the gaps left by the restructured Swiss network. As several plans centered on the use of the Saab 2000, those initial revenue flights obviously face uncertainty.

Moritz Suter, founder of Crossair, became the first to acknowledge interest in starting a new airline to serve Geneva and Lugano, precisely with a Saab 2000. He met with city officials from Lugano on August 25 to discuss possible official support, and later indicated his willingness to use an alternative to the Saab 2000 if Lugano bans the 50-seat turboprop. Suter has named his new company “Hello.”

Almost simultaneously a group of businessmen from Lugano headed by Mose Franco announced plans to establish a new company called Darwin Airline, also with Saab 2000s. Meanwhile, another businessman based in southern Switzerland, Tiziano de Gasperis, has proposed an airline operating a yet unspecified single-type fleet of regional airliners out of Lugano. His company, TicinoJet, would fly to several European destinations with the backing of Mideast financiers.

On the Geneva side, a project proposed by local banker Julian Cook calls for operating several daily flights with a 50-seat de Havilland Dash 8-300 between Geneva and Lugano starting next month. Cook, who once worked with Chase Manhattan’s aerospace unit in London, plans to add another Dash 8-300 every six months during the coming three years and to extend the airline’s network to destinations in France and Italy. He claims to have the backing of investors from western Switzerland. Late last month Cook reportedly signed a partnership with Lufthansa affiliate Cirrus Airlines, ostensibly to wet lease Cirrus airplanes while he awaits FOCA approval to operate his own.

Luckily for Cook, the Bombardier Dash 8 series can legally contend with the proposed six-degree glideslope at Lugano. The company will operate under the label Baboo Airways, a name recalling a musical production company in which Cook once participated. Inspired by the low-cost sector, Baboo will offer flights between Geneva and Lugano at one-way fares from SFr49 to SFr200 ($35 to $145).

Suter, Franco and Cook have each filed applications with FOCA for permission to re-start scheduled service between Geneva and Lugano on October 26. An ad-hoc committee of seven local governments has pledged support for the start-up carriers, and plan to lobby FOCA for an expeditious approval of their applications.

Outsiders question the rush of new airlines to Lugano, where passenger throughput has declined from an annual peak of 338,800 in 1998 to 225,000 last year. However, Giorgio Marcionni, the charismatic manager of the airport, blames the decline on Crossair’s demise and the subsequent weak presence by Swiss. He appeared convinced of a strong demand for flights out of Lugano to destinations other than Zurich, where Swiss will maintain four daily feeder flights beyond next month. “We have seen airlines come and go, but our municipal airport is a permanent structure ready to handle air traffic as demanded by our community,” said Marcionni.

Exodus from BernThe situation is different at Bern, a regional airport Swiss plans to abandon completely after next month. Bern benefits from a 90-minute direct rail link with Zurich, one reason few airlines have managed to draw enough traffic there to succeed long term. Majority-owned by a private stock company, Bern Airport currently offers links to Berlin, Vienna and Stuttgart with InterSky Dash 8-300s, which in June added a daily Bern-Paris round trip abandoned by Swiss a few months ago. AirAlps offers three daily round trips between Bern and Amsterdam with its 30-seat Fairchild Dornier 328s, and Lufthansa also maintains a feeder link to its Frankfurt hub with a Dash 8-300. Airline and overall traffic has declined for several years at Bern, but the airfield holds some importance for the Swiss government, which uses it for its executive jets and helicopters. Bern opened a new passenger terminal this summer.

Under its restructuring plan, Swiss will drop all its flights to and from Bern, and reduce service from Lugano to four daily return flights to Zurich with Avro RJs. Swiss will also reduce its flights into former Yugoslavia. In that sector, Zurich-based Odette Airways hopes to pick up much of the traffic with a fleet of Fokker 100s. Odette operates a single MD-83 offered for holiday charter, but CEO Thomas Frischknecht claims to have secured the financing to acquire a batch of Fokker 100s. Germania Express holds a minority share in Odette, and tariffs of the new scheduled services to Pristina, Skopje and other destinations in former Yugoslavia will follow the Germania pattern: e99 for short trips and e148 for longer trips. FOCA is currently reviewing Odette’s proposal, which, according to Frischknecht, will draw from considerable but price-sensitive demand for flights between Switzerland and the Balkans.

Finally, it appears British Airways also sees an opportunity in Swiss’ misfortune, announcing it will fly three daily round trips between London City and Geneva to replace the service abandoned by Swiss.

While Swiss has reached agreements with its pilots unions and reported good progress on its restructuring plans early last month, the company had failed to raise the SFr500 million ($360 million) it said it needs to become profitable. Deutsche Bank, led by Swiss national Josef Ackermann, said it would open a credit line to the airline for that amount, subject to the airline’s ability to negotiate a government guarantee. However, the Swiss government at press time had not accepted the offer. Barclay’s Bank of the UK has surfaced as another potential lender. The airline posted a loss of $240 million for the first half of this year, after reporting a $700 million loss from the start of operations in March 2002 until year-end.

According to Swiss COO Manfred Brennwald, the airline now has three options: joining forces with Lufthansa in some way or another, joining the Oneworld alliance with British Airways and American Airlines, or continuing as an independent. Brennwald’s dilemma lies in the fact that neither Lufthansa nor British Airways have showed much interest, and independence without fresh money appears unrealistic.